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£550m gap in tax revenue will not impact Budget, insists minister

The Scottish Fiscal Commission estimate for 2016/17 was £11.3bn, but the outturn figure was £10.7bn.

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Finance Secretary Derek Mackay said there would be no impact on the Scottish Budget from the lower tax outturn(David Cheskin/PA)

Finance Secretary Derek Mackay said there would be no impact on the Scottish Budget from the lower tax outturn(David Cheskin/PA)

Finance Secretary Derek Mackay said there would be no impact on the Scottish Budget from the lower tax outturn(David Cheskin/PA)

A gap of more than £500 million between income tax revenue and forecast estimates will not impact the Scottish Budget, the Finance Secretary has said.

The Scottish Fiscal Commission estimated income tax revenue of around £11.3 billion for 2016/17 but the outturn figure was £10.7 billion, a £550 million difference.

Giving evidence to Holyrood’s Finance and Constitution Committee, Derek Mackay said more accurate figures were coming from HMRC on outturn than the survey-based estimates used in the initial forecasts, and these would be reconciled as a baseline figure.

“In short there’s no impact on the Scottish Budget as a consequence of that particular issue,” he said.

“Fundamentally we have a clearer understanding of how many additional rate and higher rate taxpayers that we have, so that will inform decisions going forward.”

He said all decision makers have to be mindful of the tax base composition on future policies.

Labour’s James Kelly argued having 5,000 fewer additional taxpayers and 45,000 fewer higher rate taxpayers than previously estimated would mean future public spending cuts.

Mr Mackay said: “There is no half a billion pound hit on the Scottish Budget.”

Mr Kelly continued: “Surely if you have less taxpayers going forward and therefore less revenue coming through, particularly at these higher rates, then when you set your budget for 19/20 you are going to have less in that envelope and that’s going to feed through to cuts in public services?”

The minister said this was not the case, but Mr Kelly said it would be the policy outcome if current tax levels were maintained.

“It isn’t actually as simple as that,” Mr Mackay said. “What we do is relative to what the UK Government’s doing in their tax policy.”

He added: “I understand the point if we have fewer taxpayers in a particular category – marginal rate of tax – then that has implications for the outcome, but the historic issues have been redressed because it was about the baselining to which we were all working.

“And of course the starting position of the Scottish Budget is the block grant, all the other adjustments come after that.”

PA